Israel’s Mobility Startup Ecosystem: Key Insights from McKinsey’s December 2023 Mobility Report

This report highlights the role of Israel’s smart mobility ecosystem while discussing major global mobility trends and investments. It underscores the growth and innovation of Israeli startups, emphasizing Israel’s crucial position in the global smart mobility market. The report explores the key trends shaping mobility, including climate change, electrification, autonomous driving, shared transportation, and the increasing importance of software over hardware. Additionally, it examines the challenges and opportunities faced by Israeli mobility startups.

Global Mobility Trends

Mobility is a transformative industry and a fundamental part of everyday life, influencing productivity, environmental sustainability, employment, and infrastructure accessibility. Five megatrends are currently shaping the mobility ecosystem:

1. Climate Change

The growing global awareness of climate change is driving the development of new sustainable transportation solutions. Companies and investors are increasingly focused on achieving net-zero emissions. This shift is accelerating the adoption of electric vehicles (EVs) and innovative shared mobility services. However, achieving net-zero goals requires fully sustainable solutions and environmentally friendly production methods across the mobility sector.

2. Electrification

Electric Vehicles (EVs) are a disruptive force in mobility, gaining rapid popularity with strong regulatory backing. Despite a slowdown in Q2-Q3 2023, EVs remain a core focus for the mobility industry. New EU and U.S. regulations target at least 50% EV adoption by 2030, with several nations accelerating timelines for banning internal combustion engine (ICE) vehicle sales between 2030 and 2035.

3. Autonomous Mobility

Autonomous mobility—including private AVs, urban robotaxis, public transport shuttles, drones, and long-haul freight AVs—is expected to enhance consumer experiences, introduce new uncertainties, and disrupt existing business models. AV technology will improve safety, parking efficiency, and fuel savings through optimal speed regulation.

4. Shared Mobility

Innovations in shared mobility are reshaping transportation through micro-mobility, last-mile delivery, car-sharing, and urban air mobility. By 2030, shared mobility revenues are projected to reach $450 billion to $860 billion, comprising 80-90% of total shared mobility consumer spending. The global micro-mobility market is expected to more than double, reaching approximately $90 billion.

5. The Shift from Hardware to Software

Software is becoming a critical enabler of all other mobility trends. The value of software-driven mobility is projected to account for one-third of a car's total value in the coming years. Vehicles are evolving into Software-Defined Vehicles (SDVs), where software controls key automotive functions traditionally managed by hardware. Software will continue playing a pivotal role in electrification (e.g., battery health monitoring), AV development (e.g., AI-based object detection), IoT integration, and V2X (vehicle-to-everything) connectivity.

Global Mobility Investment Landscape

Between 2010 and 2023, mobility investments were heavily concentrated in the U.S. ($327 billion), followed by China ($230 billion) and the U.K. ($60+ billion). When measured per capita GDP, Israel ranks first, followed by Singapore and Sweden.

Across countries such as the U.K., Sweden, and Singapore, the top three investment deals account for over 50% of total mobility funding.

As global investment in future mobility increased over the past decade, certain technologies received significantly higher funding. Excluding used car sales, the top five funded mobility technologies since 2010 include:

  1. E-hailing (ride-hailing services) – $157 billion
  2. EVs – $147 billion
  3. Battery technology – $89 billion
  4. Semiconductors – $65 billion (up to 10% of Israel’s total mobility funding)
  5. ADAS (Advanced Driver Assistance Systems) components – $54 billion (up to 40% of Israel’s total mobility funding)

Between 2020 and 2023, mobility investments declined following COVID-19, leading to shifting technology trends. However, certain sectors saw significant investment growth:

  • EV investments grew 350% (from $8.2 billion in 2015-2019 to $28.8 billion in 2020-2023).
  • Battery investments surged 900% (from $2.3 billion to $21.1 billion).
  • AV integration investments increased 300% (from $3.2 billion to $10.1 billion), surpassing ADAS investment.

Investment distribution varies by country:

  • Israel and the U.S. lead in AV and connected vehicle technologies (56%, 48%).
  • Germany and the U.K. dominate mobility services (70%, 56%).
  • China leads in electrification (51%).

Israel’s Mobility Startup Ecosystem

Over the past decade, high-tech has become Israel’s largest and fastest-growing industry, employing ~10% of the workforce and contributing 18% of GDP. Israel’s entrepreneurial culture, startup success rate, and exit strategies (M&A or IPOs) have attracted global investor interest, earning it the reputation of a "Startup Nation" or "Scale-Up Nation."

Key Milestones in Israel’s Mobility Ecosystem

  • Waze (acquired by Google in 2013)
  • Mobileye (IPO in 2014, acquired by Intel in 2017 for $15.3 billion)
  • Better Place (EV startup, 2007-2013, collapsed after initial success)

Currently, 8% of Israel’s high-tech sector is focused on mobility, with strong expertise to drive automotive technology advancements over the next decade.

Israel hosts 724 active mobility startups and companies (including public and acquired firms founded since 1990).

  • Largest sectors by number of companies:
    • Autonomous & Connected Vehicles – 26%
    • Mobility Services – 25%

Most Israeli mobility startups are small-to-medium enterprises, with over 85% employing fewer than 50 people.

Between 2018 and 2023, Israel’s mobility sector saw 13 IPOs and 47 M&A transactions.

Challenges and Government Support for Mobility Innovation

Like global trends, Israeli tech investments peaked in 2021 before declining in 2022 and 2023.

  • H1 2023 global funding fell 50% YoY.
  • H1 2023 Israeli funding fell 73% YoY.

Key Government Initiatives Supporting Mobility Innovation

  1. Israel National Drone Initiative – A collaboration between the Israel Innovation Authority, Ministry of Transport, Civil Aviation Authority, and Smart Mobility Authority to develop a national aerial network for drone-based deliveries (e.g., medical supplies, vaccines, retail shipments). Israel conducted its first air taxi test flight in June 2023.

  2. Israel Cyber Center for Intelligent Transport Systems (CyITS) – A national mobility cybersecurity research and testing center funded by the Ministry of Transport, National Cyber Directorate, and Ayalon Highways. It provides testing services, regulatory guidance, and R&D support for mobility cybersecurity.

  3. Autonomous Bus Pilot Program – A government-backed initiative involving four startup-led consortia to pilot commercial AV buses.

Looking Ahead: The Future of Israel’s Mobility Ecosystem

The demand for new mobility technologies is rising. Israeli startups and global companies must align solutions with emerging industry needs to maximize opportunities.

To scale effectively, startups must integrate into the global mobility ecosystem, engage investors, and collaborate with industry players, while also leveraging local talent and strategic partnerships.

The mobility industry continues to evolve, presenting new challenges and opportunities. To remain competitive, Israel’s mobility ecosystem must embrace innovation, secure funding, and adapt to global market shifts.

This article summarizes McKinsey’s 2023 report: "Mobility Tech as a Source of Innovation: Israel's Smart Mobility Startup Ecosystem."
📌 Read the full report here

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